Express hands bears huge profits

Option traders reaped exponential returns on downside positions in Express today.

On May 16, Investitute’s tracking systems showed that 14,300 June $7 puts were purchased mostly for $0.20 with shares at $8.02. This represented new positions, as volume was well above the strike’s open interest of 8,590 contracts.

Today those puts traded for $1.05, a gain of more than 400 percent. The stock fell 25.3 percent in the same period, a substantial move but one that paled in comparison to that of the options.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

EXPR dropped 19.2 percent to $6.27 today. The apparel and accessories retailer missed earnings and revenue estimates while issuing poor guidance this morning.